Malaysia Airlines Clarifies Boeing Deal

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In response to media reports and statements regarding its aircraft fleet plans, including the recent MoU with Boeing, MAB said it has a firm order of 25 737 aircraft, with everything else being optional, and the funding for all aircraft was planned on operational leases.

  • Inked last year, MAB has a firm order of 25 737 aircraft with another 25 options
  • Eight 737 MAX from the 25 firm order were converted to eight 787-9 Dreamliners in the MoU
  • Eight new 737 MAX 8 in the MoU were also within the 25 firm order
  • The total value of the order of 50 was US$5.5 billion (RM23.1 billion)
  • List price of eight 787-9 Dreamliners US$2.5 billion (RM10.5 billion)
  • The order now has the option of taking delivery of the larger MAX 9 and MAX 10, instead of the MAX 8
  • Global lessors and lenders, not MAB, will foot the bill for the planes
  • The planes will then be leased to MAB
  • First delivery of 787-9 Dreamliner in Q3 2019
  • Initial Dreamliner to operate Asian services
MAS

Boeing and Malaysia Airlines Bhd (MAB) signed a Memorandum of Understanding (MoU) for 16 airplanes during a ceremony attended by Prime Minister Datuk Seri Najib Razak and Minister of Trade Datuk Seri Mustapa Mohamed at the St Regis Hotel in Washington DC on Sept 12.

The deal includes eight 787-9 Dreamliners by converting eight of MAB’s previous order of eight Boeing 737 MAX and eight 737 MAX 8s as well as Boeing’s Global Fleet Care service to maintain the national carrier’s current and future Boeing aircraft.

MAB said the addition of the eight 787-9 Dreamliners to its fleet will enable the airline to provide a high level of quality on its most lucrative routes.

MAB managing director and chief executive Peter Bellew said it will help propel the service of the national carrier further into a premier airline.

When the announcement was made of the Boeing deal last week, some Malaysians were sceptical about the purchase.

The National Union of Flight Attendants Malaysia (Nufam) also spoke out against the deal.

“Buying new planes does not guarantee the airline will succeed if their financial overheads are deemed unmanageable,” its secretary-general Mohd Akram Osman said in a statement, the media reported.

“More planes mean new routes and more workers. This is like going back to square one where MAS was claimed to be over-bloated with workers. The airline had to lay off 6,000 workers two years ago.

“It’s just less than three years after this retrenchment and here they go again over-spending to purchase more planes,” Akram said

“The government injected RM6 billion and now more money is willingly spent for the airline. Is MAS making huge profits already? he asked.

Akram also asked where the planes would fly to as the union had not heard of any new destinations or routes for the airline.

“Although it is good to see Malaysia Airlines pick up again, but as we say it’s still too soon to count the eggs in the basket,” he added.

Yesterday, financial paper The Malaysian Reserve reported that the new planes will not be owned by MAB but will be on operating leases, quoting an internal memo dated Sept 15.

The report said global lessors and lenders will foot the bill for the planes and then lease them to MAB on an operating sale and leaseback agreement.

According to the memo to the airline’s 14,000 staff, Bellew said the recent purchase coincided with the end of the other lease agreements.

The first delivery of the eight 787-9 Dreamliners, with a list price of US$2.5 billion (RM10.5 billion), is expected in the third quarter of 2019.

The initial 787-9 Dreamliner aircraft will operate MAB’s Asian services, said Bellew.

Bellew said the latest orders from Boeing were within the 25 firm orders for the 737-MAX 8 aircraft with another 25 options, which was inked last year.

The total value of this Boeing MAX 8 order of 50 was US$5.5 billion (RM23.1 billion), with the order now having an option to take delivery of some of the larger Boeing MAX 9 and MAX 10 aircraft instead of the MAX 8.

“In all of this, I would like to reiterate that as of now, we have a firm order of 25 Boeing 737 aircraft with everything else being optional,” Bellew said.

Reuters

He said the decision to have the purchase option and other arrangements will give MAB the flexibility in deciding the aircraft that suits its operational environment.

“Having said this, the management will continue carefully evaluating all options available to us to ensure our purchases make both business and operational sense.

“This is necessary and in line with ongoing prudent fleet management and cost containment efforts across the group,” Bellew said.

Malaysia Airlines currently has 54 aircraft in its fleet of 737-800 with 48 actually operating, as six of these aircraft are being handed back to lessors in December 2017 and are currently going through a lease return maintenance programme.


Earlier report: Sept 13, MAS to Relaunch Long-Haul Routes with New Boeing 787s.